STOCK MARKET WATCH -- 9 August 2012

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16. France faces deeper cuts and threat of recession

http://www.irishtimes.com/newspaper/finance/2012/0809/1224321805767.html


FRANÇOIS HOLLANDE’S government may be forced into deeper than expected spending cuts in the autumn after the Bank of France said the economy may be slipping back into recession for the first time in three years.

In a bleak assessment of France’s short-term prospects, the central bank said the economy was likely to fall into a shallow recession in the third quarter. The report cast doubt on the government’s growth forecasts, adding to pressure on the government as it prepares a tough budget for the autumn.

Following worse than expected economic figures from Germany and Italy this week, the bank’s forecast for Europe’s second-biggest economy dampened hopes that the euro zone recovery is around the corner. European stock markets have rallied strongly in recent days amid speculation that governments and the European Central Bank will embark on concerted action in the coming weeks to relieve pressure on the currency area’s weakest economies.

France emerged from its last recession – defined as two consecutive quarters of negative growth – in the spring of 2009, and the economy has since struggled to gain momentum in the face of the euro zone debt crisis.